As we move into 2011 the technology sector remains optimistic. However, no one expects it to be a peaceful ride. Valuations such as the $50bn price tag assigned to Facebook in its latest funding round may feel like a return to the hype of the early 2000s, but deep pockets have allowed for some uniquely disruptive market entries such as Google and Amazon in the last decade.
Many of us remember the paradigm that was supposed to have emerged during the dot.com boom and the subsequent revision, when the market finally recognised that the basic rules of business still applied even in a virtual world. The key then and now is how you get and retain customers to drive profitable growth.
Unlike the dot.com boom the focus from the financial markets in the last two years has been on the capacity for revenue generation.
The financial results of Facebook, a private US company, are not in the public domain but it is clear the possibility of exploiting the potential buying power inherent in the social network remains irresistible to many investors. It remains to be seen, however, exactly how that value will be delivered.
Once upon a time there was clear demarcation between business models in the IT sector. While VARs focused on a particular segment's needs, selling a range of third-party products with complementary in-house services, SIs provided heavily customised solutions involving complex design, integration and implementation services.
As early as 2008 we saw a strong move towards a services-led approach, with services already providing half of many VARs’ revenues. VARs moved into the traditional SI space.
Services remain the dominant theme. Business continues to demand lower and more controlled costs. This is mirrored in the ongoing transition from capex to opex. Channel companies have had to try managed services, leasing, and other ways to shift their business from resale to annuity revenue flows.
Product and sales cycles have had to adapt, with pressure on financing remaining key. Dealing with the funding needs that accompany the transition remains a key challenge.
Cloud is becoming one of the winners, allowing users to develop, deploy and run applications that can scale up or down easily.
Although security and reliability worries about the infrastructure providers still constrain growth, small development teams began to emerge last year and this will continue in 2011.
End users now expect IT applications to be available at all times and in many locations. The business benefits are obvious, but providing secure systems and ubiquitous access present their own challenges and so continue to provide opportunities for the channel.
The line between personal and business social networking is blurring, while many businesses struggle to adapt their approach and policies accordingly.
So ask yourself this: What were you trying to build last year and is it still relevant for the markets you target? The UK market has a large number of smaller, niche businesses.
Complementary partnerships and alliances are at the core of extending capability. Businesses do not need to create all the elements of a product or service themselves. However, finding the right partner requires skilled networking and careful research.
Understand who your most important allies are and how they relate to your business. What piece of the jigsaw do you provide? Was this a one-off or is it repeatable through a strategic alliance?
The right distribution channels are still core to extending sales reach and effectiveness. Have you taken the necessary steps to move to a hybrid products-and-services delivery model?
The economy is expected to show modest growth in the next 12 months. So take time out to revisit your plans in light of current trends.
Niki Dixon is head of technology at Grant Thornton
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